Proof of Work vs. Proof of Stake [ADB s1e4]

Doctor Bitcoin unpacks proof-of-work and proof-of-stake when securing a blockchain, as well as the importance of understanding the difference between the two methods.

What’s that?

Proof-of-work is the primary method of securing a blockchain. When mining, the node makes a request for the encrypted nugget of data and then attempts to decrypt it by guessing the password. When it does guess the password, the node reaps the award—the block—for decrypting. As more people begin to decrypt the algorithms, the encryptions become increasingly difficult, requiring more processing power to solve. Essentially, the award is the mined block, which proves that you did the work (provided processing power) to crack the encryption.

Proof-of-stake requires you to stake an amount of the tokens you are trying to secure. In this process, you would buy a certain number of tokens, lock them up in a wallet, and each one is a chance to reap the award—the block as it is secured. Instead of using your processing power for a chance to secure the block, you are purchasing tokens for that chance.

Both methods have their positives and negatives. Proof-of-stake is more ecological and efficient but can be more economically unfriendly to the user. Proof-of-work is more energy-expensive and less ecological but also more egalitarian.

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